Error Identified in ERCOT’s Credit Monitoring and Management (CMM) System

July 10, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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ERCOT said in a July 9 market notice that it, "has identified an error in the [Credit Monitoring and Management] CMM system that occurred beginning January 1, 2020."

"The error affected the calculation of the Future Credit Exposure (FCE) component of Total Potential Exposure (TPE). FCE determines the amount of Financial Security that a Counter-Party (CP) must provide for activity related to Congestion Revenue Rights (CRRs)," ERCOT said

"Per Protocol Section 16.11.4.5, Determination of the Counter-Party Future Credit Exposure, an average of rolling consecutive Day-Ahead Market (DAM) settled prices for a period representing a month is used to calculate two components of FCE: the Portfolio Weighted Adder (PWA) and the Path Specific DAM Based Adder. The PWA is used to determine the FCE for PTP Obligations (FCEOBL). The Path Specific DAM Based Adder is used to determine the FCE for PTP Options (FCEOPT)," ERCOT said

"From January 1 to July 5, 2020, ERCOT used DAM settled prices as of December 31, 2019, rather than continuously updated prices, to determine the PWA and Path Specific DAM Based Adder. ERCOT has determined that this error occurred because the table of DAM settled prices used for this calculation must be updated periodically via a manual process, and the required update to the table was not executed. ERCOT has corrected the error and is developing an automated process to update the table as a permanent solution," ERCOT said

"Although this error impacted the calculation of FCEOBL and FCEOPT from January 1 to July 5, 2020, it did not affect the FCE for any CP until March 19, 2020. ERCOT has identified 25 CPs whose FCE was incorrectly calculated on at least one Operating Day from March 19 to July 5, 2020, due to this error. ERCOT is aware of one instance where the error triggered a request for additional Financial Security; however, this did not result in a breach or default scenario," ERCOT said

"Finally, ERCOT is considering a more holistic review of the CMM system to identify possible inconsistencies between the system as-built and Protocol requirements, and will discuss the issue with stakeholders at the Market Credit Working Group (MCWG) / Credit Work Group (CWG) meeting on July 15, 2020," ERCOT said

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